JERUSALEM, Dec 13 (Reuters) - Washington's Middle East peace envoy said on Monday he would strive to achieve real progress in the coming months toward a Middle East framework peace deal, despite the collapse of direct Israeli-Palestinian talks.

Launching the first round of shuttle diplomacy since negotiations hit an impasse over Jewish settlement building, George Mitchell met Israeli Prime Minister Benjamin Netanyahu at his office in Jerusalem.

In the days ahead our discussion with both sides will be substantive two-way conversations, with an eye toward making real progress in the next few months on the key questions of an eventual framework agreement, Mitchell said as talks began.

Mitchell shuttled between Israeli and Palestinian leaders for months before direct talks began in September. They broke down weeks later when Netanyahu refused to extend a 10-month freeze on housing starts in settlements in the occupied West Bank.

Earlier this month Washington formally abandoned efforts to persuade Israel to agree to a partial renewal of the settlement moratorium in exchange for security guarantees.

Netanyahu praised Washington's move, telling a business forum in Tel Aviv on Monday: I welcome this American decision. It is good for Israel. It is good for peace.

Standing beside Mitchell later in Jerusalem, Netanyahu said the goal was now a new path, to achieve a common goal which is to get a framework agreement for peace that will ensure both peace and security.

Mitchell will hold separate talks with Palestinian President Mahmoud Abbas on Tuesday in the occupied West Bank.

RETURN TO INDIRECT TALKS

Secretary of State Hillary Clinton announced on Friday the U.S. would refocus efforts on a return to indirect talks and would push to resolve core issues in the six-decade conflict.

These include borders, security, the future of Jerusalem and settlements in territory Israel occupied in the 1967 Middle East War, and the fate of Palestinian refugees.

Palestinian officials, who have been highly critical of the U.S. policy shift, said the seriousness of any diplomacy would depend on a halt to settlement building and setting out clear terms of reference.

Palestinian officials fear settlement expansion on land where they aim to found their state will make statehood impossible, and have voiced concern Israel may try to avoid discussion of their future state borders.

The Palestine Liberation Organisation's executive committee met on Monday and said Israel's policy threatened the stability of the region and showed its priorities were settlement, expansion and perpetuating the occupation.

In a statement from Brussels, the European Union also pressed Israel on the settlements issue.

Our views on settlements, including in East Jerusalem, are clear: they are illegal under international law and an obstacle to peace, said the statement issued by EU foreign ministers.